What you need to know about ETFs

Exchange-traded funds are a great way to trade markets in the short term. But before you dive in, says Paul Amery - here's what you need to know.

Do you know your market orders' from your limit' and stop-limit' orders? If you're trading exchange-traded funds (ETFs), you need to. ETFs have given fund investors a great deal more power to trade markets in the short term and that power can be harnessed or mis-handled.

Historically, most investment funds were bought and sold on a bulk, once-a-day basis, at a single price, the net asset value (NAV). This meant there wasn't much of a trading aspect to fund selection. (In practice, many fund operators added a commission or initial load' to the price payable by fund buyers, but that's tended to vanish as competition has grown.)

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Paul Amery

Paul is a multi-award-winning journalist, currently an editor at New Money Review. He has contributed an array of money titles such as MoneyWeek, Financial Times, Financial News, The Times, Investment and Thomson Reuters. Paul is certified in investment management by CFA UK and he can speak more than five languages including English, French, Russian and Ukrainian. On MoneyWeek, Paul writes about funds such as ETFs and the stock market.